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FleetCor is a leading independent global provider of fuel cards and workforce payment products and services to businesses, commercial fleets, major oil companies, petroleum marketers and government entities in countries throughout North America, Latin America and Europe. Our payment programs enable our customers to better manage and control employee spending and provide card-accepting merchants with a high volume customer base that can increase their sales and customer loyalty. In 2012, we processed approximately 304 million transactions on our proprietary networks and third-party networks. We believe that our size and scale, geographic reach, advanced technology and our expansive suite of products, services, brands and proprietary networks contribute to our leading industry position.

We provide our payment products and services in a variety of combinations to create customized payment solutions for our customers and partners. In order to deliver our payment programs and services and process transactions, we own and operate proprietary â€śclosed-loopâ€ť networks through which we electronically connect to merchants and capture, analyze and report customized information. We also use third-party networks to deliver our payment programs and services in order to broaden our card acceptance and use. To support our payment products, we also provide a range of services, such as issuing and processing, as well as specialized information services that provide our customers with value-added functionality and data. Our customers can use this data to track important business productivity metrics, combat fraud and employee misuse, streamline expense administration and lower overall fleet operating costs.
We market our payment products directly to a broad range of businesses, commercial fleet customers, oil companies, petroleum marketers and government entities. Among these customers, we provide our products and services to commercial fleets of all sizes. These fleets include small and medium commercial fleets, which we believe represent an attractive segment of the global commercial fleet market given their relatively high use of less efficient payment products, such as cash and general purpose credit cards. We also manage commercial fleet card programs for major oil companies, such as British Petroleum (BP) (including its subsidiary Arco), Chevron and Citgo, and over 800 petroleum marketers.

These companies collectively maintain hundreds of thousands of end-customer relationships with commercial fleets. We refer to these major oil companies and petroleum marketers with whom we have strategic relationships as our â€śpartners.â€ť

FleetCorâ€™s predecessor company was organized in the United States in 1986.

Our products and services

We sell a range of customized fleet and lodging payment programs directly and indirectly through partners, such as major oil companies and petroleum marketers. We provide our customers with various card products that typically function like a charge card to purchase fuel, lodging and related products and services at participating locations. We support these cards with specialized issuing, processing and information services that enable us to manage card accounts, facilitate the routing, authorization, clearing and settlement of transactions, and provide value-added functionality and data, including customizable card-level controls and productivity analysis tools. Depending on our customerâ€™s and partnerâ€™s needs, we provide these services in a variety of outsourced solutions ranging from a comprehensive â€śend-to-endâ€ť solution (encompassing issuing, processing and network services) to limited back office processing services. In Brazil, we have designed proprietary equipment which, when installed at the fueling site and on the vehicle and combined with our processing system, significantly reduces the likelihood of unauthorized and fraudulent transactions. We offer this product to over-the-road trucking fleets, shipping fleets and other operators of heavily industrialized equipment, including sea-going vessels, mining equipment, agricultural equipment, and locomotives. In addition, we offer a telematics solution in Europe that combines global positioning, satellite tracking and other wireless technology to allow fleet operators to monitor the capacity utilization and movement of their vehicles and drivers. Furthermore, in Mexico, we offer prepaid fuel and food vouchers and cards that may be used as a form of payment in restaurants, grocery stores and gas stations. We market these payment products to small, medium and large businesses, which provide these cards and vouchers to their employees as benefits, as well as a tool to manage fuel expenses. Approximately 13.0% of our revenue during the year ended December 31, 2012 came from our lodging, prepaid fuel and food vouchers and cards and telematics products. Other than our fuel card products and services, no other products or services accounted for 10% or more of consolidated revenues in any of the last three fiscal years.

Networks

In order to deliver our payment programs and services, we own and operate proprietary closed-loop networks in North America and internationally. In other cases we utilize the networks of our major oil and petroleum marketer partners. Our networks have well-established brands in local markets and proprietary technology that enable us to capture, transact, analyze and report value-added information pertinent to managing and controlling employee spending. Examples of our networks include:

North American proprietary closed-loop networks

â€˘
Fuelman network â€”our primary proprietary fleet card network in the United States. We have negotiated card acceptance and settlement terms with over 12,000 individual merchants, providing the Fuelman network with more than 45,000 fueling sites and nearly 27,000 maintenance sites across the country.

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Corporate Lodging Consultants network (CLC) â€”our proprietary lodging network in the United States and Canada. The CLC Lodging network covers more than 17,800 hotels across the United States and Canada.

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Commercial Fueling Network (CFN) â€”our â€śmembers onlyâ€ť unattended fueling location network in the United States and Canada. The CFN network is composed of approximately 2,675 fueling sites, each of which is owned by a CFN member, and the majority of which are unattended cardlock facilities. The CFN membership base is comprised of approximately 260 independent petroleum marketers. Our members join CFN to provide network access to their fleet customers and benefit from fleet card volume generated by our other membersâ€™ fleet customers fueling at their locations.

International proprietary closed-loop networks

â€˘
Allstar network â€”our recently acquired proprietary fleet card network in the United Kingdom. We have negotiated card acceptance and settlement terms with approximately 3,200 individual merchants, providing this network with over 7,500 fueling sites.

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Keyfuels network â€”our primary proprietary fleet card network in the United Kingdom. We have negotiated card acceptance and settlement terms with approximately 490 individual merchants, providing the Keyfuels network with over 2,090 fueling sites.

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CCS network â€”our primary proprietary fleet card network in the Czech Republic and Slovakia. We have negotiated card acceptance and settlement terms with more than 620 oil brands, including several major oil companies on a brand-wide basis (such as Agip, Benzina, OMV and Shell), and more than 1,000 other merchants, providing the CCS network with over 2,620 fueling sites and 1,100 other sites accepting our cards.

â€˘
CTF network â€”our newly acquired proprietary fuel controls network in Brazil. We have partnerships with BR Distribuidora (Petrobas) and Ipiranga Distribuidora, retail oil distributors in Brazil. CTFâ€™s processing system works at over 1,000 highway fueling sites through these partnerships.

Third-Party networks
In addition to our proprietary â€śclosed-loopâ€ť networks, we also utilize various third-party networks to deliver our payment programs and services. Examples of these networks include:

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MasterCard network â€”In the United States and Canada, we issue corporate cards that utilize the MasterCard payment network, which includes 194,000 fuel sites and 494,000 maintenance location. Our co-branded MasterCard corporate cards have additional purchasing capabilities and can be accepted at over 35.9 million locations worldwide. We market these cards to customers who require card acceptance beyond our proprietary merchant locations. The MasterCard network delivers the ability to capture value-added transaction data at the point-of-sale and allows us to provide customers with fleet controls and reporting comparable to those of our proprietary fleet card networks.

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Major oil and fuel marketer networks â€”The proprietary networks of branded locations owned by our major oil and petroleum marketer partners in both North America and internationally are generally utilized to support the proprietary, branded card programs of these partners.

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UTA network â€”UNION TANK Eckstein GmbH & Co. KG (UTA) operates a network of over 47,000 fleet card-accepting locations across 38 countries throughout Europe, including more than 32,000 fueling sites. The UTA network is generally utilized by European transport companies that travel between multiple countries.

â€˘
DKV network â€”DKV operates a network of over 54,000 fleet card-accepting locations across 42 countries throughout Europe, including more than 37,500 fueling sites. The DKV network is generally utilized by European transport companies that travel between multiple countries.

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Carnet networks â€”In Mexico, we issue fuel cards and food cards that utilize the Carnet payment network, which includes approximately 12,700 fueling sites and 79,800 food locations across the country.

Customers and distribution channels
We provide our products and services primarily to fleet customers and our major oil company and petroleum marketer partners. Our commercial fleet customers are businesses that operate fleets comprised of one or more vehicles, including small fleets (1-10 vehicles), medium fleets (11-150 vehicles), large fleets (over 150 vehicles), and government fleets (which are owned and operated by governments). We also provide services through strategic relationships with our partners, ranging in size from major oil companies, such as British Petroleum (BP) (including its subsidiary, Arco), Chevron, Shell and Citgo, to small petroleum marketers with a single fueling location. While we refer to companies with whom we have strategic relationships as â€śpartners,â€ť our legal relationships with these companies are contractual, and do not constitute legal partnerships.

We distribute our products and services directly to fleet customers as well as through our major oil company and petroleum marketer partners. We provide comprehensive â€śend-to-endâ€ť support for our direct card programs that include issuing, processing and network services. We manage and market the fleet card programs of our partners under our partnersâ€™ own brands. We support these programs with a variety of business models ranging from fully outsourced card programs, which include issuing, processing and network services, to card programs where we may only provide limited back office processing services. These supporting services vary based on our partnersâ€™ needs and their own card program capabilities.

We primarily provide issuing, processing and information services to our major oil company partners, as these partners utilize their proprietary networks of branded locations to support their card programs. In addition, we provide network services to those major oil company partners who choose to offer a co-branded MasterCard as part of their card program. Our agreements with our major oil company partners typically have initial terms of five to ten years with current remaining terms ranging from less than one year up to seven years. Our top three strategic relationships with major oil companies represented in the aggregate approximately 16%, 21%, and 22% of our consolidated revenue for the years ended December 31, 2012, 2011 and 2010, respectively. No single partner represented more than 10% of our consolidated revenue in 2012. In 2011 and 2010, our relationship with Chevron represented approximately 11% of our consolidated revenue.

We provide similar products and services to government fleet customers as we provide to other commercial fleet customers. Our government fleet customers generally constitute local, state or federal government-affiliated departments and agencies with vehicle fleets, such as police vehicle fleets and school bus fleets.

CEO BACKGROUND

Our Board of Directors is divided into three classes, with each class serving for a staggered three-year term. The Board of Directors consists of three class I directors, three class II directors and two class III directors. Our directors are divided among the three classes as follows:

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the class I directors are Messrs. Carroll, Johnson and Stull;

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the class II directors are Messrs. Balson, Evans and Marschel; and

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the class III directors are Messrs. Clarke and Macchia.

At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The terms of the class I directors, class II directors and class III directors identified above will expire upon the election and qualification of successor directors at the annual meeting of stockholders held during the calendar years 2014, 2015 and 2013, respectively.
Two directors are to be elected at the Annual Meeting to hold office until the annual meeting of Stockholders in 2016, and until their respective successors are elected and qualified. The accompanying proxy will be voted in favor of the nominees named below to serve as directors unless the Stockholder indicates to the contrary on the proxy. All the nominees are current directors. Our current directors were initially designated pursuant to a stockholders agreement, which terminated upon completion of our initial public offering.

The Board of Directors expects that each of the nominees will be available for election, but if any of them is unable to serve at the time the election occurs, the proxy will be voted for the election of another nominee to be designated by our Board.

NOMINEES

Ronald F. Clarke, 57
Class III
Director since 2003
Term expires 2013

Mr. Clarke has been our Chief Executive Officer since August 2000 and was appointed Chairman of our Board of Directors in March 2003. From 1999 to 2000, Mr. Clarke served as President and Chief Operating Officer of AHL Services, Inc., a staffing firm. From 1990 to 1998, Mr. Clarke served as chief marketing officer and later as a division president with Automatic Data Processing, Inc., a computer services company. From 1987 to 1990, Mr. Clarke was a principal with Booz Allen Hamilton, a global management consulting firm. Earlier in his career, Mr. Clarke was a marketing manager for General Electric Company, a diversified technology, media, and financial services corporation.

Director Qualifications:

â€˘
Business and strategic acquisition experienceâ€”significant experience with our business as our chief executive officer for more than twelve years; strategic direction for our numerous acquisitions both domestically and internationally over this period.

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Leadership experienceâ€”chairman of our Board of Directors, providing leadership and oversight of our Boardâ€™s operations; prior experience as an executive officer with several public companies, including service as a chief operating officer, chief marketing officer and division president.

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High level of financial literacyâ€”significant experience with our finance function through his oversight of our chief financial officer for ten years.

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Industry and company knowledgeâ€”significant familiarity with our company and industry through his service as our chief executive officer for more than twelve years, his prior experience in the financial and business services industry, including with AHL Services, Inc. (staffing services), Automated Data Processing, Inc. (transaction processing, data communication and information services) and his experience providing management consulting services with Booz Allen, a global management consulting firm.

Richard Macchia, 61
Class III
Director since 2010
Term expires 2013

Mr. Macchia joined our Board of Directors in July 2010. Mr. Macchia served as Chief Financial Officer and Senior Vice President of Administration for Internet Security Systems, Inc., an information security provider, from December 1997 through October 2005. Mr. Macchia remained employed with Internet Security Systems, Inc. during the following year to transition the Chief Financial Officer role to his successor. Internet Security Systems, Inc. was acquired by International Business Machines Corporation in October 2006 and Mr. Macchia has been retired since October 2006.

Director Qualifications:

â€˘
Business and leadership experienceâ€”retired chief financial officer and senior vice president of administration; oversaw financial functions, human resources, facilities and investor relations; served in senior executive roles with several public companies for over 20 years; served as a partner of KPMG LLP, an international accounting firm, for two years.

â€˘
Leadership experienceâ€”former partner of KPMG LLP and former chief financial officer and senior vice president of administration with Internet Security Systems, Inc.

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High level of financial literacyâ€”served as a principal financial or principal accounting officer with several public companies for over twenty years; certified public accountant in good standing since 1976; practiced with KPMG LLP from 1973 to 1985.

Mr. Carroll joined our Board of Directors in May 2002. Since 1998, Mr. Carroll has served as a Managing Director with Summit Partners, a growth equity firm. Mr. Carroll has served on numerous private company Boards.
Director Qualifications:

â€˘
Business and strategic acquisition experienceâ€”managing director of Summit Partners; helps oversee investments in portfolio companies in North America, Europe and Asia; evaluates and oversees strategic acquisitions and dispositions by Summit Partners and its portfolio companies.

â€˘
Leadership experienceâ€”director of numerous private companies, including serving as member of audit and compensation committees.

â€˘
High level of financial literacyâ€”seventeen years of experience with Summit Partners, a global growth equity investment firm, including serving as a managing director; experience overseeing and evaluating investments and portfolio companies; former experience as a commercial banker with BayBank Corporation.

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Industry and company knowledgeâ€”served as our Board member since 2002 providing strategic, financial and acquisition advice relevant to our growth domestically and internationally; oversees investments and portfolio companies in the technology, business, financial and information services industries; former Bain & Company consultant to the financial services industry.

Mark A. Johnson, 60
Class I
Director since 2003
Term expires 2014

Mr. Johnson joined our Board of Directors in March 2003. Since September 2008, Mr. Johnson has served as a partner with Total Technology Ventures, a venture capital firm. From February 2003 to January 2008, Mr. Johnson was Vice Chairmanâ€”M&A of CheckFree Corporation. Mr. Johnson served on the Board of Directors of CheckFree from 1982 to 2007.
Director Qualifications:

â€˘
Business and strategic acquisition experienceâ€”a partner of Total Technology Ventures, a venture capital firm; chairman of Venture Atlanta and member of the Board of Directors of the Technology Association of Georgia; former vice chairman of CheckFree Corporation (a Nasdaq-listed company acquired in December 2007 by Fiserv, Inc.) which included oversight of mergers and acquisitions and evaluating strategic growth opportunities.

â€˘
Leadership experienceâ€”former vice chairman of CheckFree Corporation; responsibilities included overseeing mergers and acquisitions, evaluating strategic growth opportunities, developing strategic corporate relationships and supporting long term business strategies; member of the CheckFree Board of Directors; joined CheckFree Corporation in 1982 as vice president of operations; currently serves as a member of the Board of Directors of private companies.

â€˘
High level of financial literacyâ€”founder of e-RM Ventures, a private investing consultancy focused on early-stage payments-related companies; former experience with the Federal Reserve Bank of Cleveland and Bank One with responsibilities for checking and cash management operations; member of balance sheet committee of CheckFree Corporation; public company audit committee experience.

â€˘
Industry and company knowledgeâ€”served as our Board member since 2003 providing strategic advice relevant to our growth; senior executive of CheckFree Corporation, a provider of financial electronic commerce services and products to organizations around the world; responsible for the development and launch of CheckFreeâ€™s commercial and consumer electronic funds transfer services and CheckFreeâ€™s electronic bill payment and bill presentment businesses as well as the development of key strategic alliances and marketing initiatives.

Steven T. Stull, 53
Class I
Director since 2000
Term expires 2014

Mr. Stull joined our Board of Directors in October 2000. Since 1992, Mr. Stull has served as President of Advantage Capital Partners, a private equity firm, which he co-founded.
Director Qualifications:

â€˘
Leadership experienceâ€”director of numerous private companies, including serving as member of audit and compensation committees.

â€˘
High level of financial literacyâ€”served for nine years as an executive in the investment department of General American Life Insurance Company, heading its securities division and personally managing its high yield, convertible, and preferred stock portfolios; experience as a chief financial officer; experience with a commercial bank and a savings and loan association.

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Industry and company knowledgeâ€”served as our Board member since 2000 providing strategic advice relevant to our growth; oversees investments and portfolio companies in the technology, business, financial and information services industries; served as the chief financial officer of an information services company.

Andrew B. Balson, 46
Class II
Director since 2005
Term expires 2015

Mr. Balson has served as a director of the Company since June 2005 and has served as a Managing Director at Bain Capital Partners, LLC, a private equity firm since 2000. Mr. Balson also serves on the Board of Directors of Dominoâ€™s Pizza, Inc., where he chairs the Compensation Committee, and Bloominâ€™ Brands, Inc. where he chairs the Compensation Committee, as well as a number of other private companies.
Director Qualifications:

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Leadership experienceâ€”director of numerous public and private companies, including serving as member of nominating and corporate governance and compensation committees.

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High level of financial literacyâ€”over twelve years of experience as a managing director of a global investment company overseeing and evaluating investments and portfolio companies; former experience in the merchant banking group of Morgan Stanley & Co. and the leveraged buyout group of SBC Australia.

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Industry and company knowledgeâ€”served as our Board member since 2005 providing strategic and financial advice relevant to our growth; oversees investments and portfolio companies in the software and business services industries; former Bain & Company consultant to the technology, telecommunications, financial services and consumer goods industries.

Bruce R. Evans, 54
Class II
Director since 2002
Term expires 2015

Mr. Evans joined our Board of Directors in May 2002. Since 1986, Mr. Evans has served in various positions with Summit Partners, including most recently as a Managing Director. Mr. Evans currently serves as a director of Casa Systems, and Multifonds (IGEFI Group). Mr. Evans has previously served as a director of optionsXpress Holdings, Inc., Unica Corporation and Hittite Microwave Corporation.
Director Qualifications:

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Business and strategic acquisition experienceâ€”managing director of Summit Partners; oversees investments in portfolio companies in North America, Europe and Asia; evaluates and oversees strategic acquisitions and dispositions by Summit Partners and its portfolio companies; director of the National Venture Capital Association.

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Leadership experienceâ€”served as a director of more than twenty-six private and public companies, including as a member of audit, nominating, governance, investment and compensation committees; substantial experience addressing corporate development, compensation, human resources, governance, management and growth strategy matters; member of the Vanderbilt University Board of Trustees; Chairman of Summit Partners Board of Managers.

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High level of financial literacyâ€”over twenty-six years of experience with Summit Partners, a global growth equity investment firm, including serving as a managing director; substantial experience overseeing and evaluating numerous investments and portfolio companies; past service on public company audit committees.

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Industry and company knowledgeâ€”served as our Board member since 2002 providing strategic, financial and acquisition advice relevant to our growth domestically and internationally; oversees investments and portfolio companies in the technology, business and financial services industries; prior experience in the data processing and national accounts divisions of International Business Machines Corporation.

Glenn W. Marschel, 66
Class II
Director since 2002
Term expires 2015

Mr. Marschel joined our Board of Directors in September 2002. Since August 2000, Mr. Marschel has served as President and Chief Executive Officer of NetNumber, Inc., a provider of standards based registry and directory services and software technology to the communications industry.
Director Qualifications:

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Business experienceâ€”extensive experience as a senior executive of various technology, payment and information processing companies; currently the president and chief executive officer of NetNumber, Inc., a provider of standards based software technology to the communications industry.

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Leadership experienceâ€”president and chief executive officer of NetNumber, Inc.; former chief executive officer, president and co-chairman of Faroudja, Inc., a video processing technology company; former president and chief executive officer of Paging Network Inc., a provider of wireless messaging services; and former vice chairman of First Financial Management Corporation, a provider of credit card and transaction authorization, processing and settlement, healthcare claims processing and document management/imaging services; experience serving on the Board of Directors of private and public companies.

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Industry and company knowledgeâ€”served as our Board member since 2002 providing strategic advice relevant to our growth; extensive senior executive experience in the technology, payment processing and information processing industries, including substantial experience with Automated Data Processing, Inc., a computer services company, where he served as president of several businesses, including the automotive and employer services divisions, following senior positions in sales, client services, strategy and marketing.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

FleetCor is a leading independent global provider of fuel cards and workforce payment products and services to businesses, commercial fleets, major oil companies, petroleum marketers and government entities in countries throughout North America, Latin America and Europe. Our payment programs enable our customers to better manage and control employee spending and provide card-accepting merchants with a high volume customer base that can increase their sales and customer loyalty. In 2012, we processed approximately 304 million transactions on our proprietary networks and third-party networks. We believe that our size and scale, geographic reach, advanced technology and our expansive suite of products, services, brands and proprietary networks contribute to our leading industry position.

We provide our payment products and services in a variety of combinations to create customized payment solutions for our customers and partners. We sell these products and services directly and indirectly through partners with whom we have strategic relationships, such as major oil companies and petroleum marketers. We refer to these major oil companies and petroleum marketers as our â€śpartners.â€ť We provide our customers with various card products that typically function like a charge card to purchase fuel, lodging, food and related products and services at participating locations. Our payment programs enable businesses to better manage and control employee spending and provide card-accepting merchants with a high volume customer base that can increase their sales and customer loyalty.

In order to deliver our payment programs and services and process transactions, we own and operate proprietary â€śclosed-loopâ€ť networks through which we electronically connect to merchants and capture, analyze and report customized information. We also use third-party networks to deliver our payment programs and services in order to broaden our card acceptance and use. To support our payment products, we also provide a range of services, such as issuing and processing, as well as specialized information services that provide our customers with value-added functionality and data. Our customers can use this data to track important business productivity metrics, combat fraud and employee misuse, streamline expense administration and lower overall fleet operating costs.

FleetCorâ€™s predecessor company was organized in the United States in 1986. In 2000, our current chief executive officer joined us and we changed our name to FleetCor Technologies, Inc. Since 2000, we have grown significantly through a combination of organic initiatives, product and service innovation and over 50 acquisitions of businesses and commercial account portfolios. Our corporate headquarters are located in Norcross, Georgia. As of December 31, 2012, we employed approximately 2,650 employees, approximately 700 of whom were located in the United States.

Our segments, sources of revenue and expenses

Segments

We operate in two segments, which we refer to as our North American and International segments. The results from our Mexican prepaid fuel card and food voucher business acquired during the third quarter of 2011, the Allstar business acquired during the fourth quarter of 2011, the Russian businesses acquired during the second and third quarter of 2012 and CTF Technologies, Inc. acquired during the third quarter of 2012 are each reported in our International segment. Our revenue is reported net of the wholesale cost for underlying products and services.

Sources of Revenue

Transactions. In both of our segments, we derive revenue from transactions and the related revenue per transaction. As illustrated in the diagram below, a transaction is defined as a purchase by a customer. Our customers include holders of our card products and those of our partners, for whom we manage card programs. Revenue from transactions is derived from our merchant and network relationships as well as our customers and partners. Through our merchant and network relationships we primarily offer fuel, vehicle maintenance, food or lodging services to our customers.

From our merchant and network relationships, we derive revenue mostly from the difference between the price charged to a customer for a transaction and the price paid to the merchant or network for the same transaction. As illustrated in the table below, the price paid to a merchant or network may be calculated as (i) the merchantâ€™s wholesale cost of fuel plus a markup; (ii) the transaction purchase price less a percentage discount; or (iii) the transaction purchase price less a fixed fee per unit. The difference between the price we pay to a merchant and the merchantâ€™s wholesale cost for the underlying products and services is considered a â€śmerchant commissionâ€ť and is recognized as an expense. We also derive revenue from our merchant and network relationships through a variety of program, transaction and fixed fees. Approximately 53.1% and 48.6% of our revenue during 2012 and 2011 was derived from our merchant and network relationships.

From our customers and partners, we derive revenue from a variety of program fees including transaction fees, card fees, network fees and report fees. Our programs include other fees and charges associated with late payments and based on customer credit risk. Approximately 46.9% and 51.4% of our revenue during 2012 and 2011 was derived from customer and partner program fees and charges.

Transaction volume and revenue per transaction.

Calculation of revenue per transaction for our International segment and on a consolidated basis for 2010 excludes the impact of a non-renewed partner contract in Europe, inherited from an acquisition, which we chose not to renew. This non-renewed contract contributed approximately 3.6 million transactions and $0.9 million in revenues, net to our International segment in 2010. This contract had a high number of transactions and very little revenue and if we had included it in the calculation would have reduced International segment revenue per transaction negatively by $0.25 in 2010. We believe that excluding the impact of this contract is a more effective measure for evaluating the revenue performance of our continuing business.

Revenue per transaction is derived from the various revenue types as discussed above and can vary based on geography, the relevant merchant relationship, the payment product utilized and the types of products or services purchased, the mix of which would be influenced by our acquisitions, organic growth in our business, and the overall macroeconomic environment, including fluctuations in foreign currency exchange rates. Revenue per transaction per customer changes as the level of services we provide to a customer increases or decreases, as macroeconomic factors changes and as adjustments are made to merchant and customer rates.

Revenue per transaction in our International segment has historically run higher than the North America segment due primarily to higher margins and higher fuel prices in our international product lines. However, acquisitions in 2011 have significantly impacted revenue per transaction in our International segment, as well as on a consolidated basis. In 2011, we acquired a Mexican business and Allstar in the U.K., which together contributed to the increase in transaction volumes and revenues in our International segment. While the acquired Mexican and U.K. businesses represent good profit margin businesses, they do have lower revenue per transaction products in comparison to our other businesses. The impact of the products offered by our businesses acquired in Mexico and the U.K. were partially offset by the impact of acquisitions completed in 2012. In 2012, we acquired a Russian fuel card business and CTF Technologies, Inc. (CTF), which have higher revenue per transaction products in comparison to our businesses. However, the overall impact of these acquisitions resulted in lower revenue per transaction for our International segment and on a consolidated basis.

From 2011 to 2012, total transactions increased from 214.8 million to 303.8 million, an increase of 89.0 million or 41.4%. We experienced an increase in transactions in our North American and International segments primarily due to organic growth in certain payment programs and the impact of the acquisitions completed in 2012 and the full year impact of acquisitions completed in 2011.

From 2010 to 2011, total transactions increased from 190.4 million to 214.8 million, excluding the impact of a non-renewed partner contract in Europe, an increase of 24.4 million or 12.8%. We experienced an increase in transactions in our North American and International segments, excluding the impact of a non-renewed partner contract in Europe, primarily due to organic growth in certain payment programs and the impact of the acquisitions in 2011. This non-renewed partner had a high number of transactions and very little revenue.

Although we cannot precisely calculate the impact of fuel price spreads and the absolute price of fuel on our consolidated revenues, we believe these percentages approximate their relative impacts.

Adjusted Revenues, EBITDA, Adjusted Net Income and Adjusted Net Income Per Diluted Share

We use adjusted revenues as a basis to evaluate our revenues, net of the commissions that are paid to merchants to participate in our card programs. The commissions paid to merchants can vary when market spreads fluctuate in much the same way as revenues are impacted when market spreads fluctuate. Thus, we believe this is a more effective way to evaluate our revenue performance on a consistent basis. We use EBITDA, calculated as earnings before interest, taxes, depreciation and amortization to eliminate the impact of certain non-core items during the period. We use adjusted net income and adjusted net income per diluted share to eliminate the effect of items that we do not consider indicative of our core operating performance on a consistent basis. Adjusted revenues, EBITDA, adjusted net income and adjusted net income per diluted share are supplemental non-GAAP financial measures of operating performance. See the heading entitled â€śManagementâ€™s Use of Non-GAAP Financial Measures.â€ť

Sources of expenses

We incur expenses in the following categories:

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Merchant commissions â€”We incur merchant commissions expenses when we reimburse merchants with whom we have direct, contractual relationships in respect of specific transactions in which a customer purchases products or services from the merchant. Merchant commission equals the difference between the price paid by us to the merchant and the merchantâ€™s wholesale cost of the underlying products or services.

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General and administrative â€”Our general and administrative expenses include compensation and related expenses (including stock-based compensation) for our executive, finance and accounting, information technology, human resources, legal and other administrative personnel. Also included are facilities expenses, third-party professional services fees, travel and entertainment expenses, and other corporate-level expenses.

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Provision for income taxes â€”The provision for income taxes consists primarily of corporate income taxes related to profits resulting from the sale of our products and services in the United States and internationally. Our worldwide effective tax rate is lower than the U.S. statutory rate of 35%, due primarily to lower rates in foreign jurisdictions and foreign-sourced non-taxable income.

Factors and trends impacting our business
We believe that the following factors and trends are important in understanding our financial performance:

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Fuel prices â€”Our fleet customers use our products and services primarily in connection with the purchase of fuel. Accordingly, our revenue is affected by
fuel prices, which are subject to significant

Sources of Revenue.

volatility. A change in retail fuel prices could cause a decrease or increase in our revenue from several sources, including fees paid to us based on a percentage of each customerâ€™s total purchase. We believe that approximately 21%, 24% and 19% of our consolidated revenue in 2012, 2011 and 2010, respectively, was directly influenced by the absolute price of fuel. Changes in the absolute price of fuel may also impact unpaid account balances and the late fees and charges based on these amounts.

â€˘
Fuel-price spread volatility â€”A portion of our revenue involves transactions where we derive revenue from fuel-price spreads, which is the difference between the price charged to a fleet customer for a transaction and the price paid to the merchant for the same transaction. In these transactions, the price paid to the merchant is based on the wholesale cost of fuel. The merchantâ€™s wholesale cost of fuel is dependent on several factors including, among others, the factors described above affecting fuel prices. The fuel price that we charge to our customer is dependent on several factors including, among others, the fuel price paid to the merchant, posted retail fuel prices and competitive fuel prices. We experience fuel-price spread contraction when the merchantâ€™s wholesale cost of fuel increases at a faster rate than the fuel price we charge to our customers, or the fuel price we charge to our customers decreases at a faster rate than the merchantâ€™s wholesale cost of fuel. Approximately 18%, 19% and 21% of our consolidated revenue in 2012, 2011 and 2010, respectively, was derived from transactions where our revenue is tied to fuel-price spreads.

â€˘
Acquisitions â€”Since 2002, we have completed over 50 acquisitions of companies and commercial account portfolios. Acquisitions have been an important part of our growth strategy, and it is our intention to continue to seek opportunities to increase our customer base and diversify our service offering through further strategic acquisitions. The impact of acquisitions has, and may continue to have, a significant impact on our results of operations and may make it difficult to compare our results between periods.

â€˘
Interest rates â€”Our results of operations are affected by interest rates. We are exposed to market risk changes in interest rates on our cash investments and debt.

â€˘
Global economic downturn â€”Our results of operations are materially affected by conditions in the economy generally, both in North America and internationally. Factors affected by the economy include our transaction volumes and the credit risk of our customers. These factors affected our businesses in both our North American and International segments.

â€˘
Foreign currency changes â€”Our results of operations are impacted by changes in foreign currency rates; namely, by movements of the British pound, Czech koruna, Russian ruble, Canadian dollar, Euro, Brazilian real and Mexican peso relative to the U.S. dollar. Approximately 56%, 67% and 66% of our revenue in 2012, 2011 and 2010, respectively, was derived in U.S. dollars and was not affected by foreign currency exchange rates.

â€˘
Expenses â€”Over the long term, we expect that our general and administrative expense will decrease as a percentage of revenue as our revenue increases. To support our expected revenue growth, we plan to continue to incur additional sales and marketing expense by investing in our direct marketing, third-party agents, internet marketing, telemarketing and field sales force.

Accounts receivable securitization

We utilize an accounts receivable securitization facility (Securitization Facility) in the ordinary course of our business to finance a portion of our accounts receivable. Prior to 2010, activity associated with our Securitization Facility was recorded off-balance sheet utilizing a qualified special-purpose entity, or QSPE, in the form of a limited liability company. The QSPE raised funds by issuing debt to third-party investors. The QSPE held trade accounts receivable whose cash flows are the primary source of repayment for the liabilities of the QSPE. Investors only had recourse to the assets held by the QSPE. Our involvement in these arrangements takes the form of originating accounts receivable and providing servicing activities.

In 2009, the Financial Accounting Standards Board (FASB) issued authoritative guidance limiting the circumstances in which a financial asset may be derecognized when the transferor has not transferred the entire financial asset or has continuing involvement with the transferred asset. The concept of a QSPE entity, which had previously facilitated sale accounting for certain asset transfers, is removed by this standard. This guidance was effective for us as of January 1, 2010. As a result of the adoption of such guidance, we consolidated the QSPE and the securitization of accounts receivable related to the QSPE is accounted for as a secured borrowing rather than as a sale. Accordingly, we record accounts receivable and short-term debt related to the securitization facilities as assets and liabilities on the balance sheet. In addition, our statements of income no longer include securitization activities in revenue. Rather, we report provision for bad debts and interest expense associated with the debt securities issued by the QSPE in processing expense and interest expense, net, respectively, on the Consolidated Statements of Income.

As a result of the implementation of this guidance, effective January 1, 2010, we recorded a $218.0 million increase in accounts receivable and a $218.0 million increase in current liabilities.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Overview

FleetCor is a leading independent global provider of fuel cards and workforce payment products and services to businesses, commercial fleets, major oil companies, petroleum marketers and government entities in countries throughout North America, Latin America, Europe, Australia and New Zealand. Our payment programs enable our customers to better manage and control employee spending and provide card-accepting merchants with a high volume customer base that can increase their sales and customer loyalty. In 2012, we processed approximately 304 million transactions on our proprietary networks and third-party networks. We believe that our size and scale, geographic reach, advanced technology and our expansive suite of products, services, brands and proprietary networks contribute to our leading industry position.

We provide our payment products and services in a variety of combinations to create customized payment solutions for our customers and partners. We sell these products and services directly and indirectly through partners with whom we have strategic relationships, such as major oil companies and petroleum marketers. We refer to these major oil companies and petroleum marketers as our â€śpartners.â€ť We provide our customers with various card products that typically function like a charge card to purchase fuel, lodging, food, toll road fees and related products and services at participating locations. Our payment programs enable businesses to better manage and control employee spending and provide card-accepting merchants with a high volume customer base that can increase their sales and customer loyalty.

In order to deliver our payment programs and services and process transactions, we own and operate proprietary â€śclosed-loopâ€ť networks through which we electronically connect to merchants and capture, analyze and report customized information. We also use third-party networks to deliver our payment programs and services in order to broaden our card acceptance and use. To support our payment products, we also provide a range of services, such as issuing and processing, as well as specialized information services that provide our customers with value-added functionality and data. Our customers can use this data to track important business productivity metrics, combat fraud and employee misuse, streamline expense administration and lower overall fleet operating costs.

Our segments, sources of revenue and expenses

Segments

We operate in two segments, which we refer to as our North America and International segments. The results from our Russian business acquired during the second quarter of 2012, CTF Technologies, Inc. acquired during the third quarter of 2012, our Australian Fleet Card business acquired during the first quarter of 2013, New Zealand CardLink acquired during the second quarter of 2013 and Brazilian VB business acquired during the third quarter of 2013 are reported in our International segment. Our revenue is reported net of the wholesale cost for underlying products and services.

ources of Revenue

Transactions In both of our segments, we derive revenue from transactions and the related revenue per transaction. As illustrated in the diagram below, a transaction is defined as a purchase by a customer. Our customers include holders of our cards and payment products and those of our partners, for whom we manage card programs. Revenue from transactions is derived from our merchant and network relationships, as well as our customers and partners. Through our merchant and network relationships we primarily offer fuel, vehicle maintenance, products, food or lodging services to our customers. We also earn revenue from our customers and partners through program fees and charges, which can be fixed fees, cost plus a mark-up or based on a percentage discount from retail prices.

From our merchant and network relationships, we mostly derive revenue from the difference between the price charged to a customer for a transaction and the price paid to the merchant or network for the same transaction. As illustrated in the table below, the price paid to a merchant or network may be calculated as (i) the merchantâ€™s wholesale cost of fuel plus a markup; (ii) the transaction purchase price less a percentage discount; or (iii) the transaction purchase price less a fixed fee per unit. The difference between the price we pay to a merchant and the merchantâ€™s wholesale cost for the underlying products and services is considered a â€śmerchant commissionâ€ť and is recognized as an expense. Approximately 45.6% and 49.2% of our revenue was derived from our merchant and network relationships during the three months ended September 30, 2013 and 2012, respectively. Approximately 47.7% and 53.8% of our revenue was derived from our merchant and network relationships during the nine months ended September 30, 2013 and 2012, respectively.

llustrative Revenue Model for Fuel Purchases

From our customers and partners, we derive revenue from a variety of program fees such as transaction fees, card fees, network fees and report fees. Our payment programs include other fees and charges associated with late payments and based on customer credit risk. Approximately 54.4% and 50.8% of our revenue was derived from customer and partner program fees and charges during the three months ended September 30, 2013 and 2012, respectively. Approximately 52.3% and 46.2% of our revenue was derived from customer and partner program fees and charges during the nine months ended September 30, 2013 and 2012, respectively.

Key operating metrics

Transaction volume and revenue per transaction

Revenue per transaction is derived from the various revenue types as discussed above and can vary based on geography, the relevant merchant relationship, the payment product utilized and the types of products or services purchased, the mix of which would be influenced by our acquisitions, organic growth in our business and the overall macroeconomic environment. When we talk about the macroeconomic environment, we are referring to the impact of market spread margins, fuel prices, foreign exchange rates and the economy in general can have on our business. Revenue per transaction per customer changes as the level of services we provide to a customer increases or decreases, as macroeconomic factors change and as adjustments are made to merchant and customer rates.
Revenue per transaction has been positively impacted by our acquisitions in 2012 and 2013, which each have higher revenue per transaction products in comparison to our other businesses, as well as organic growth in certain of our businesses.

Total transactions increased from 79.3 million in the three months ended September 30, 2012 to 84.3 million in the comparable period in 2013, an increase of 5.0 million transactions or 6.4%.Total transactions increased from 225.4 million in the nine months ended September 30, 2012 to 237.4 million in the comparable period in 2013, an increase of 12.1 million transactions or 5.4%. We experienced an increase in transactions in our North American and International segments due to organic growth in certain of our payment programs and the impact of acquisitions completed in 2012 and 2013.

Sources of Revenue

Adjusted Revenues, EBITDA, Adjusted Net Income and Adjusted Net Income Per Diluted Share.

We use adjusted revenues as a basis to evaluate our revenues, net of the commissions that are paid to merchants to participate in our card programs. The commissions paid to merchants can vary when market spreads fluctuate in much the same way as revenues are impacted when market spreads fluctuate. Thus, we believe this is a more effective way to evaluate our revenue performance on a consistent basis. We use EBITDA, calculated as earnings before interest, taxes, depreciation and amortization to eliminate the impact of certain non-core items during the period. We use adjusted net income and adjusted net income per diluted share to eliminate the effect of items that we do not consider indicative of our core operating performance on a consistent basis. Adjusted revenues, EBITDA, adjusted net income and adjusted net income per diluted share are supplemental non-GAAP financial measures of operating performance. See the heading entitled â€śManagementâ€™s Use of Non-GAAP Financial Measures.â€ť

Factors and trends impacting our business

We believe that the following factors and trends are important in understanding our financial performance:

â€˘
Fuel prices â€“ Our fleet customers use our products and services primarily in connection with the purchase of fuel. Accordingly, our revenue is affected by fuel prices, which are subject to significant volatility. A change in retail fuel prices could cause a decrease or increase in our revenue from several sources, including fees paid to us based on a percentage of each customerâ€™s total purchase. We believe that approximately 20.0% and 21.7% of our consolidated revenue during the three months ended September 30, 2013 and 2012, respectively, and 20.1% and 20.8% of our consolidated revenue during the nine months ended September 30, 2013 and 2012, respectively, was directly influenced by the absolute price of fuel. Changes in the absolute price of fuel may also impact unpaid account balances and the late fees and charges based on these amounts.

â€˘
Fuel-price spread volatility â€“ A portion of our revenue involves transactions where we derive revenue from fuel-price spreads, which is the difference between the price charged to a fleet customer for a transaction and the price paid to the merchant for the same transaction. In these transactions, the price paid to the merchant is based on the wholesale cost of fuel. The merchantâ€™s wholesale cost of fuel is dependent on several factors including, among others, the factors described above affecting fuel prices. The fuel price that we charge to our customer is dependent on several factors including, among others, the fuel price paid to the merchant, posted retail fuel prices and competitive fuel prices. We experience fuel-price spread contraction when the merchantâ€™s wholesale cost of fuel increases at a faster rate than the fuel price we charge to our customers, or the fuel price we charge to our customers decreases at a faster rate than the merchantâ€™s wholesale cost of fuel. Approximately 14.8% and 14.0% of our consolidated revenue during the three months ended September 30, 2013 and 2012, respectively, and 16.5% and 17.6% of our consolidated revenue during the nine months ended September 30, 2013 and 2012, respectively, was derived from transactions where our revenue is tied to fuel-price spreads.

â€˘
Acquisitions â€”Since 2002, we have completed over 60 acquisitions of companies and commercial account portfolios. Acquisitions have been an important part of our growth strategy, and it is our intention to continue to seek opportunities to increase our customer base and diversify our service offering through further strategic acquisitions. The impact of acquisitions has, and may continue to have, a significant impact on our results of operations and may make it difficult to compare our results between periods.

â€˘
Interest rates â€”Our results of operations are affected by interest rates. We are exposed to market risk changes in interest rates on our cash investments and debt.

â€˘
Global economic downturn â€”Our results of operations are materially affected by conditions in the economy generally, both in North America and internationally. Factors affected by the economy include our transaction volumes and the credit risk of our customers. These factors affected our businesses in both our North American and International segments.

â€˘
Foreign currency changes â€“ Our results of operations are impacted by changes in foreign currency rates; namely, by movements of the British pound, Czech koruna, Russian ruble, Canadian dollar, Euro, Brazilian real, Mexican peso, Australian dollar and New Zealand dollar relative to the U.S. dollar. Approximately 51.1% and 54.2% of our revenue during the three months ended September 30, 2013 and 2012, respectively, and 52.4% and 57.7% of our revenue during the nine months ended September 30, 2013 and 2012, respectively, was derived in U.S. dollars and was not affected by foreign currency exchange rates.

â€˘
Expenses â€“ Over the long term, we expect that our general and administrative expense will decrease as a percentage of revenue as our revenue increases. To support our expected revenue growth, we plan to continue to incur additional sales and marketing expense by investing in our direct marketing, third-party agents, internet marketing, telemarketing and field sales force.

Results of Operations

Three months ended September 30, 2013 compared to the three months ended September 30, 2012

Revenues and revenue per transaction
Our consolidated revenues increased from $186.9 million in the three months ended September 30, 2012 to $225.2 million in the three months ended September 30, 2013, an increase of $38.2 million, or 20.4%. The increase in our consolidated revenue was primarily due to:

â€˘
organic growth in certain of our payment programs driven primarily by increases in both volume and revenue per transaction; and

â€˘
the full period impact of acquisitions completed in 2012 as well as acquisitions completed in 2013, which contributed approximately $18 million in additional revenue in the three months ended September 30, 2013 over the comparable period in 2012.

â€˘
Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a slightly positive impact on our consolidated revenue for the three months ended September 30, 2013 over the comparable period in 2012. The macroeconomic environment was primarily impacted by slightly higher fuel spread margins offset by slightly lower fuel prices and the unfavorable impact of changes in foreign exchange rates in the three months ended September 30, 2013 over the comparable period in 2012. Changes in foreign exchange rates were mixed and had a slightly unfavorable impact on our business of approximately $2.3 million due primarily to unfavorable fluctuations in the Brazilian Real and British Pound, during the three months ended September 30, 2013 over the comparable period in 2012.

Consolidated revenue per transaction increased from $2.36 in the three months ended September 30, 2012 to $2.67 in the three months ended September 30, 2013, an increase of $0.31 or 13.2%. This increase is primarily due to organic growth in certain of our payment programs and the full period impact of acquisitions completed in 2012, as well as acquisitions completed in 2013, the majority of which have higher revenue per transaction products in comparison to our other businesses.

North America segment revenues and revenue per transaction

North America revenues increased from $101.5 million in the three months ended September 30, 2012 to $115.3 million in the three months ended September 30, 2013, an increase of $13.8 million, or 13.6%. The increase in our North America segment revenue was primarily due to:

â€˘
organic growth in certain of our payment programs driven primarily by increases in both volume and revenue per transaction; and

â€˘
the impact of an acquisition completed in 2013, which contributed approximately $3 million in additional revenue in the three months ended September 30, 2013 over the comparable period in 2012.

â€˘
Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a slightly positive impact on our North American segment revenue for the three months ended September 30, 2013 over the comparable period in 2012, primarily due to the impact of higher fuel spread margins, partially offset by the impact of slightly lower fuel prices.
North America segment revenue per transaction increased from $2.46 in the three months ended September 30, 2012 to $2.66 in the three months ended September 30, 2013, an increase of $0.20 or 8.1%. North America revenue per transaction was impacted by the reasons discussed above.
International segment revenues and revenue per transaction
International segment revenues increased from $85.4 million in the three months ended September 30, 2012 to $109.9 million in the three months ended September 30, 2013, an increase of $24.5 million, or 28.6%. The increase in our International segment revenue was primarily due to:

â€˘
organic growth in certain of our payment programs driven primarily by increases in both volume and revenue per transaction; and

â€˘
the full period impact of acquisitions completed in 2012 as well as acquisitions completed in 2013, which contributed approximately $15 million in additional revenue in the three months ended September 30, 2013 over the comparable period in 2012.

â€˘
Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a slightly negative impact on our International segment revenue for the three months ended September 30, 2013 over the comparable period in 2012, due to the unfavorable impact of changes in foreign exchange rates of approximately $2.3 million, due primarily to unfavorable fluctuations in the Brazilian Real and British Pound, partially offset by the positive impact of slightly higher fuel spread margins and slightly higher fuel prices internationally during the three months ended September 30, 2013 over the comparable period in 2012.

International segment revenue per transaction increased from $2.24 in the three months ended September 30, 2012 to $2.68 in the three months ended September 30, 2013, an increase of $0.43 or 19.4%. This increase is primarily due to organic growth in certain of our payment programs and the full period impact of acquisitions completed in 2012, as well as acquisitions completed in 2013, the majority of which have higher revenue per transaction products in comparison to our other businesses.

Consolidated operating expenses

Merchant commissions Merchant commissions increased from $12.9 million in the three months ended September 30, 2012 to $16.9 million in the three months ended September 30, 2013, an increase of $4.0 million, or 31.0%. This increase was due primarily to the fluctuation of the margin between the wholesale cost and retail price of fuel, which impacted merchant commissions, as well as the impact of higher volume in revenue streams where merchant commissions are paid, primarily in our North American segment.

Processing Processing expenses increased from $30.6 million in the three months ended September 30, 2012 to $33.5 million in the three months ended September 30, 2013, an increase of $2.9 million, or 9.5%. Our processing expenses primarily increased due to the impact of acquisitions completed in 2012 and 2013.

Selling Selling expenses increased from $12.8 million in the three months ended September 30, 2012 to $13.9 million in the three months ended September 30, 2013, an increase of $1.1 million, or 8.4%. Our selling expenses primarily increased due to the impact of acquisitions completed in 2012 and 2013, as well as additional sales and marketing spending in certain markets.

General and administrative General and administrative expenses increased from $31.2 million in the three months ended September 30, 2012 to $31.6 million in the three months ended September 30, 2013, an increase of $0.4 million, or 1.1%. Our general and administrative expenses increased primarily due to the impact of acquisitions completed in 2012 and 2013, as well as approximately $1.8 million of additional one-time deal related costs, which was partially offset by lower stock based compensation expense.

Depreciation and amortization Depreciation and amortization increased from $13.6 million in the three months ended September 30, 2012 to $18.1 million in the three months ended September 30, 2013, an increase of $4.5 million, or 32.9%. The increase in our depreciation and amortization expense is primarily due to acquisitions completed during 2012 and 2013, which resulted in an increase of $5.8 million related to the amortization of acquired intangible assets for customer and vendor relationships, trade names and trademarks, non-compete agreements and software, as well as acquired fixed assets and development related to our Global FleetNet (GFN) application. These increases were partially offset by the impact of certain assets becoming fully depreciated and amortized.

Operating income and operating margin

Consolidated operating income

Operating income increased from $85.8 million in the three months ended September 30, 2012 to $111.3 million in the three months ended September 30, 2013, an increase of $25.5 million, or 29.6%. Our operating margin was 45.9% and 49.4% for the three months ended September 30, 2012 and 2013, respectively. The increase in operating income and operating margin is due primarily to the impact of acquisitions completed during 2012 and 2013, organic growth in the business driven by increases in volume and revenue per transaction, as well as synergies gained in certain of our acquired businesses. The macroeconomic environment had a neutral impact on consolidated operating income.

For the purpose of segment operating results, we calculate segment operating income by subtracting segment operating expenses from segment revenue. Similarly, segment operating margin is calculated by dividing segment operating income by segment revenue.

North America segment operating income

North America operating income increased from $49.3 million in the three months ended September 30, 2012 to $59.1 million in the three months ended September 30, 2013, an increase of $9.8 million, or 19.9%. North America operating margin was 48.5% and 51.3% for the three months ended September 30, 2012 and 2013, respectively. The increase in operating income and operating margin is due primarily to organic growth in the business driven by increases in volume and revenue per transaction. The macroeconomic environment had a slightly positive impact on North American operating income.

International segment operating income

International operating income increased from $36.6 million in the three months ended September 30, 2012 to $52.2 million in the three months ended September 30, 2013, an increase of $15.6 million, or 42.7%. International operating margin was 42.8% and 47.5% for the three months ended September 30, 2012 and 2013, respectively. The increase in operating income and operating margin is due primarily to the impact of acquisitions completed in 2012 and 2013, organic growth in the business driven by increases in volume and revenue per transaction, as well as synergies gained in certain of our acquired businesses. The macroeconomic environment had a slightly negative effect on International segment operating income.

Other income, net

Other income, net increased from $0.0 million in the three months ended September 30, 2012 to $0.2 million in the three months ended September 30, 2013, a negligible change.

Interest expense, net

Interest expense increased from $3.3 million in the three months ended September 30, 2012 to $3.8 million in the three months ended September 30, 2013, an increase of $0.5 million, or 15.7%. The increase is due to increased borrowings in the three months ended September 30, 2013 over the comparable period in 2012, primarily due to funding the purchase price for acquisitions. The following table sets forth the average interest rates paid on borrowings under our Credit Facility, to include our term loan, domestic Revolver A, foreign Revolver B and foreign swing line of credit, as well as the relevant unused credit facility fees in the three months ended September 30, 2013 and 2012. There were no borrowings under our foreign Revolver B in the three months ended September 30, 2012.

Provision for income taxes

The provision for income taxes increased from $22.9 million in the three months ended September 30, 2012 to $29.0 million in the three months ended September 30, 2013, an increase of $6.1 million, or 26.6%. We provide for income taxes during interim periods based on an estimate of our effective tax rate for the year. Discrete items and changes in the estimate of the annual tax rate are recorded in the period they occur. Our effective tax rate decreased slightly from 27.8% for three months ended September 30, 2012 to 27.0% for the three months ended September 30, 2013. Included in income tax expense in both the three months ended September 30, 2012 and 2013 is the impact of income tax benefits resulting from the enactment of a U.K. statutory tax rate reduction during each of the periods. This lower statutory rate was applied to deferred tax items, which are primarily payable in future periods, reducing income tax expense in the three months ended September 30, 2012 and 2013 by approximately $3.5 million and $3.8 million, respectively.
We pay taxes in many different taxing jurisdictions, including the U.S., most U.S. states and many non-U.S. jurisdictions. The tax rates in certain non-U.S. taxing jurisdictions are lower than the U.S. tax rate. Consequently, as our earnings fluctuate between taxing jurisdictions, our effective tax rate fluctuates.

Net income

For the reasons discussed above, our net income increased from $59.6 million in the three months ended September 30, 2012 to $78.6 million in the three months ended September 30, 2013, an increase of $19.0 million, or 31.8%.

CONF CALL

Eric R. Dey - Chief Financial Officer, Chief Accounting Officer and Secretary
Good afternoon, everyone, and thank you for joining us today. By now, everyone should have access to our third quarter press release. It can also be found at www.fleetcor.com under the Investor Relations section.

Throughout this conference call, we will be presenting non-GAAP financial information, including adjusted revenues, adjusted net income and EBITDA. This information is not calculated in accordance with GAAP, and may be calculated differently than other companiesâ€™ similarly titled non-GAAP information. Quantitative reconciliations of historical non-GAAP financial information to the most directly comparable GAAP information appears in todayâ€™s press release and on our website, as previously described. Also, we are providing 2013 guidance on a non-GAAP basis.

Finally, before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements. This includes forward-looking statements about our 2013 guidance, new products and fee initiatives and potential business development and acquisitions. They are not guarantees of future performance and, therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of those risks are mentioned in todayâ€™s press release and Form 8-K filed with the Securities and Exchange Commission. Others are discussed in our annual report on Form 10-K. These documents are available on our website as previously described and at www.sec.gov.

With that out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO.

Ronald F. Clarke - Chairman, Chief Executive Officer, President and Chairman of Executive & Acquisitions Committee
Okay. Eric, thanks. Good afternoon, everyone, and appreciate you joining the call today. I'm going to plan to cover just a couple of subjects upfront here. First, I'll comment on our Q3 results and our full year guidance. And then second, I'll discuss a bit the 2 newest acquisitions announced today, NexTraq and Epyx.

Okay. So on to the quarter. Really a very good quarter for FleetCor. We reported profit growth of 30% on $1.08 in cash EPS and 20% revenue growth on $225 million of revenue. So 20% top line, 30% bottom line. And over the last 3 quarters, our profit growth, measured in cash EPS, has been, for Q1, it was 50%; for Q2, it was 35%; and this quarter, 30%. So 50%, 35% and 30%.

So back to Q3. The drivers for the performance were really fourfold. So first, the U.S. organic growth this quarter of 14%, and really the same story driven by our universal products and our CLC business. International growth was also strong, led by our U.K. businesses, which grew 30% for the quarter. Third, we got help from our acquisitions, the Australia/New Zealand deals in the spring, along with a couple of months of our VB acquisition in Brazil. Just a reminder there, our NKT Russia deal and our CTF Brazil deal actually rolled off this quarter. And the fourth driver is a one-time happy from a favorable U.K. tax law change. That reduced our Q3 taxes by about $4 million, which increased cash EPS $0.05 for the quarter. So without this one-time tax happy, Q3 cash EPS would have been $1.03 instead of $1.08.

And then lastly, offsetting these 4 positive drivers, we did have a bit of a headwind in FX, which reduced Q3 revenue in the range of $2 million to $3 million.

So in conclusion, the quarter had strong U.S. results, strong U.K. results, some lift from our Down Under and our VB acquisitions, a one-time tax happy, all offset by a bit of unfavourable FX. But by all accounts, for us, again, a very, very good quarter.